Short-Term Healthcare

Image credit: Michael Havens via flickr

On October 31st, the US Departments of Labor, Health and Human Services and Treasury (the Departments) issued a Final Rule pertaining to short-term healthcare policies. Here are the details:

Short-term health policies are exactly as they sound: healthcare policies, limited in duration, that are meant to function to fill a gap in coverage some individuals may face during their lives if they transition between jobs or group health plans. They are currently limited to twelve months of coverage.

What the Departments have found is there is a growing practice of individuals purchasing short-term policies (which are generally cheaper than exchange policies) and then paying the IRS penalty (short-term policies are not considered Minimum Essential Coverage), which has become a cheaper option. In some cases, individuals are even allowed to renew their short-term policy past the twelve month period, further solidifying the policy as their primary coverage.

It is speculated those opting to go this route are healthier individuals that just want to ensure they have some coverage. These healthier individuals are exactly what the Affordable Care Act needs in the exchange risk pool to balance things out. This is why there was such a concerted effort to close the door on this practice and push these individuals to the exchanges.

To combat this practice and further diversify the exchange risk pool, the Departments have issues a Final Rule, which changes the twelve month maximum for short-term policy coverage to three months. This will be effective for any policies with policy years beginning January 1, 2017. It should be noted that the limit will not be enforced on any 2017 policies, sold before April 1, 2017, in states with existing approved 12 month limits providing the policy expires in the 2017 calendar year.

The full ruling can be found here.

This change won’t cause a seismic shift in the exchange risk pool, but with some of the projected rate increases being reported for 2017 and beyond, even small steps certainly help in chipping away.

Of course, in light of last night’s election results, much of the Affordable Care Act will be under a cloud of uncertainty for the foreseeable future, so stay tuned…

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Teri Weber

Teri Weber

Partner at Spring Consulting Group, LLC
Teri Weber, ACI is a Partner with Spring Consulting Group. She has over 10 years of experience in health and welfare plan strategy, design, pricing, and implementation. She also works with absence management programs, including disability, family medical leave and leave of absence tracking. Her areas of expertise have allowed her to work with diverse employers and vendors to streamline processes and programs to meet the needs of insurers, administrators, employers and employees. Teri is on the Board for the New England Employee Benefits Council (NEEBC) and recently served as lead editor for the Disability Management Employer Coalition’s (DMEC) Return to Work Program Manual. Prior to joining Spring, Teri worked with Watson Wyatt, Buck Consultants and AON Consulting. In addition she was an Account Manager with Health Direct, Inc. Teri earned a BS at the University of Connecticut and a MBA at the University of Massachusetts. She holds an ACI designation and is a licensed broker in the states of MA and CT.